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Minimize the Medicare surtax Distribute to beneficiaries who are in low income tax brackets.This will allow the income to be taxed at the beneficiaries’ lower rates, rather than at the estate’s or trust’s rate, which is 39.6% once the ,950 threshold is reached. An estate or trust may elect to treat amounts paid or credited in the first 65 days of the tax year as if they were paid or credited on the last day of the prior tax year. Before making distributions to minimize income taxes, make sure to consider other factors.Make sure to seek the advice of an estate and trust income tax specialist to determine when and how to take advantage of these opportunities.
That makes most revocable trusts qualify as grantor trusts.There is also a new tax that applies beginning in 2013, the so-called Medicare surtax, which is a 3.8% tax on “net investment income.” Net investment income generally includes (a) interest, dividends, annuities, royalties and rents, (b) gains attributable to the disposition of property and (c) income and gains from a trade or business, but only if such trade or business is a passive activity with respect to the taxpayer or involves trading in financial instruments or commodities.